Pioneer Foods has agreed to reduce its profit margins on bread and flour as part of an unprecedented R1 billion settlement with the Competition Commission.

For years, South Africans have paid artificially high prices for bread and flour because of price-fixing and collusion by big companies.

The settlement commits Pioneer to reduce its gross margins by R160 million by adjusting its pricing on flour and bread, such as 600g and 700g standard white and brown loaves.

This, said Minister of Economic Development Ebrahim Patel on Tuesday, would "bring much needed relief to consumers who have paid above-competitive prices for bread and wheat products".

"The free ride at the expense of consumers and jobs that some companies had for many decades in South Africa, is over," he told Parliament's National Assembly on Tuesday.

Patel called on bakeries and supermarkets to pass the windfall on to their customers and not use it as a chance to boost their own profits.

Pioneer Foods, one of South Africa's largest food companies, was fined R195.7m by the Competition Tribunal in February this year for price-fixing.